Good Morning Commissioner Butler, Commissioner Bator, Commissioner Hughes,
Board Staff and respective counsel. Today, we begin the evidentiary phase
of this proceeding in which the New Jersey Division of Rate Counsel (“Rate
Counsel”) is a statutory party and as such has filed Initial, Reply
and Rebuttal Testimonies that contest the positions of the other parties
in this proceeding, and asks that the Board reclassify two or more lines
as non-competitive.

First, let us recognize
that this proceeding was initiated by the Board, sua sponte, and involves
the potential wholesale reclassification of all CLEC services. Let us
also acknowledge that there are over 130 companies on paper that are authorized
to provide local exchange service in New Jersey, according to the Board’s
website. However, it is peculiar that there are only two CLECs –
AT&T and Time Warner – that have joined this proceeding as active
parties. Neither of the two other active parties – Verizon NJ who
has its own agenda in this proceeding, and the NJCTA who represents cable
telephony providers – are CLECs. These are the exclusive Intervenors.
Eight other CLECs have joined in the matter on Participant status, which
exempts them from filing Testimony and relieves them of having to provide
discovery. As it turns out, this proceeding is therefore really about
AT&T’s effort to obtain regulatory freedom on all its services
and thereby have the Board authorize its ability to increase rates at
will for New Jersey customers who will have no recourse to the Board for
relief. While AT&T still has customers in New Jersey for local exchange
service, it is on a mission to harvest as much revenue from those customers
as it can before those customers wake up and go to the provider of last
resort – Verizon NJ. All the remaining CLECs are smaller carriers
who have decided not to even enter into this fray. Their absence speaks
volumes as to whether any reclassification is warranted or necessary.

That, in a nutshell,
is the state of competition in New Jersey for local exchange service.
The level of competition provides no pricing constraints on either ILECs
or CLECs. In fact, AT&T will have succeeded in getting the Board to
grant competitive status without any commitments for job growth, technological
advancements, or other conditions. AT&T is using competitive reclassification
of CLECs as a stalking horse to advance its corporate goal of harvesting
its customers through unrestricted price increases. Rate Counsel urges
the Board not to abdicate its statutory authority to guard the public
interest zealously, and to deny AT&T’s request.

Rate Counsel’s
Testimony clearly demonstrates that the claim that the local exchange
service market is competitive is a myth. There is evidence that in the
absence of the Board’s regulation of AT&T’s rates AT&T
would already have been overcharging its customers. The record also shows
that Verizon NJ’s rates on services previously declared competitive
have increased since the Board declared them so. The marketplace is not
adequate to constrain and control pricing. There is no dispute that no
CLECs have previously applied to the Board for reclassification of any
services, and that CLEC tariffs are generally approved without review
and certainly without any evidence as to the reasonableness of CLEC rates.
Moreover, no CLEC has yet petitioned the Board for alternative regulation
which is the statutory vehicle the legislature identified as the mechanism
for promotion of economic development, investment and job growth.

Most important, though,
is to confront the mirage that CLEC and Verizon NJ rates are constrained
by each others pricing. Verizon NJ continues to dominate New Jersey’s
telecommunications markets and effectively exercises it market power to
the detriment of consumers. As a result, because Verizon NJ under assigns
and under allocates joint and common costs to DSL, FIOS, and bundled offerings,
its local exchange rates inappropriately subsidize its new lines of business;
therefore, its rates for local exchange service cannot be considered just
and reasonable. The record supports that CLECs are not offering services
at rates that are at or below Verizon NJ’s rates. Therefore, no
pricing constraint exists.

The public interest
and indeed New Jersey ratepayers will be immediately harmed by the reclassification
of CLEC services as competitive. The Board should not yield the ability
to promote broadband at POTS (affordable) rates, oversee universal service
and net neutrality, and promote economic development by the telecommunications
carriers, as set forth in legislative policy, by reclassifying any services
as competitive.

Rate Counsel has
made every attempt to obtain as much evidence as possible to support its
position in this matter, evidence that is mostly in the possession of
AT&T and Verizon NJ. Yet, those efforts have been thwarted. Nevertheless,
Rate Counsel’s testimony clearly shows that no other party has sustained
the burden of proof so as to warrant classification of freeing Verizon
NJ and the CLEC services as competitive.

At the end of the
day, it is the public interest, as the overarching criterion that must
be protected. In view of the failure of CLECs to actively partake in this
investigative proceeding, the harm to the public interest is self-evident.
The Board should not declare any CLEC services competitive at this time
and should reassess whether Verizon NJ services previously declared competitive
should now be reclassified as non-competitive. AT&T’s assertions
on behalf of all CLECs are merely a sham so that AT&T can increase
rates without regulatory oversight. AT&T’s goal is not in furtherance
of the public interest.

The Board should
deny all attempts to deregulate telecommunications services in New Jersey.